Promotion and Prevention across Mental

Accounts: When Financial Products Dictate

Consumers Investment Goals
RONGRONG ZHOU
MICHEL TUAN PHAM*
We propose that consumers investment decisions involve processes of promotion
and prevention regulation that are managed across separate mental accounts, with
different financial products seen as representative of promotion versus prevention.
Consistent with this hypothesis, we show that (a) investors are differentially sensitive to gains and losses and differentially risk seeking depending on the financial
products being considered and (b) that these phenomena occur because of strong
associations between financial products and promotion versus prevention. Therefore, investors goals may be determined by the investment opportunities under
evaluation rather than being independent of these opportunities, as is assumed in
standard finance theory.

with different financial products. In particular, consumers

investment goals may be determined by the type of financial
products under evaluation rather than being independent of
the investment alternatives as standard finance theory would
suggest.
Results from four experiments show that (a) investors are
differentially sensitive to potential gains versus potential
losses depending on the financial products involved; (b) investors are differentially risk seeking with money mentally
associated with different financial accounts; (c) the mere evaluation of different financial products activates distinct promotion versus prevention orientations; and (d) the activation
of promotion versus prevention orientations steers investors
decisions toward financial products that are consistent with
these orientations. Taken together, these results indicate that
investment decisions involve processes of promotion and prevention self-regulation that are managed across different mental accounts, with different financial products seen as representative of promotion versus prevention.

o theory of consumption can be complete without an

understanding of how consumers manage their wealth.
After all, consumption requires money, and money is for
consumption. It is therefore surprising that consumer research has paid so little attention to consumers investment
decisions. In this article, we propose that consumers investment decisions are guided by self-regulation systems
called promotion and prevention (Higgins 1998). The promotion system is invoked to achieve financial gains, and the
prevention system is invoked to avoid financial losses. Although, ideally, achieving financial gains and avoiding financial losses should be addressed simultaneously, we suggest that these concerns are managed separately across
mental accounts: one account for promotion and another for
prevention. Because consumers learn to associate different
financial products with either promotion or prevention, their
investment decisions can be unduly influenced by the motivational orientations (promotion or prevention) associated

*Rongrong Zhou is assistant professor of marketing at the Hong Kong

University of Science and Technology, Clearwater Bay, Kowloon, Hong
Kong (mkrrzhou@ust.hk). Michel Tuan Pham is professor of business at
Columbia University, 3022 Broadway, New York, NY 10027
(tdp4@columbia.edu). The article is based on the first authors doctoral
dissertation completed at Columbia University under the second authors
direction. This research was supported by a grant from the Center for
Research on the Marketing of Financial Services at Columbia University.
The authors thank Sunil Gupta, Gur Huberman, Donald Lehmann, Elke
Weber, and Ronald Wilcox for their suggestions while serving on the
dissertation committee. They also thank Tory Higgins, Jonathan Levav,
Dilip Soman, and the JCR reviewers, associate editor, and editors for their
constructive comments.

SELF-REGULATION ACROSS FINANCIAL

PRODUCTS
Investing as Mean-Variance Optimization
According to standard finance theory, investment decisions should be based on trade-offs between the expected
returns of the available alternatives (e.g., individual stocks,
mutual funds, real estate) and the risks associated with
these alternatives (generally operationalized as the variance
in each alternatives returns). This idea, known as mean125
2004 by JOURNAL OF CONSUMER RESEARCH, Inc. Vol. 31 June 2004
All rights reserved. 0093-5301/2004/3101-0011$10.00

126

variance optimization, emanates from the observation that

assets with higher expected returns typically also have
greater variability of returns. Modern portfolio theory (Markowitz 1952) holds, for instance, that, for any collection of
securities, there is an efficient set of diversified portfolios
that minimizes risk for given levels of expected returns and
maximizes expected returns for given levels of risk. Rational
investors should choose their portfolios from this efficient
set and select the one that maximizes their utility given their
own attitudes toward risk (i.e., how much they would personally trade variance for expected returns).
Although the purpose of this research is not to test standard finance theory per se, our findings bear on two central
tenets of the theory. First, according to the theory, risks and
returns should be considered simultaneously, not separately,
when evaluating investment opportunities. Second, it is the
investors relative preference for risks versus expected returns that should dictate their evaluations of investment alternatives, not the reverse (i.e., the alternatives themselves
should not determine investors preference for risks vs. expected returns).

JOURNAL OF CONSUMER RESEARCH

(e.g., Higgins et al. 1986). Similarly, the prevention system

seems to be chronically more accessible among people from
collectivist cultures and people with strong and accessible
oughts. We argue that these two systems play an important
role in consumers investment decisionsa role quite different from that documented in previous research (see Pham
and Higgins [forthcoming] for a review).
We propose that consumers contemplate investment decisions in terms of two basic goals: (1) achieving financial
gains and (2) preventing financial losses. These goals resemble the standard finance trade-off between risks and returns, except that it is the prospect of losses that is posited
to motivate consumers, not the variability of returns (the
standard finance definition of risk). We further propose that
concerns related to the achievement of financial gains are
regulated by the promotion system and concerns related to
the avoidance of financial losses are regulated by the prevention system. In sum, we argue that, even though investment decisions seem very specific, they are in fact
guided by systems of self-regulation that are general.

Mental Accounting of Promotion and Prevention

Investment Decisions as Self-Regulation
Because investment decisions are typically made to fulfill
goals that are distant in time, these decisions are likely to
be guided by processes of self-regulation. Self-regulation
refers to the processes that individuals use to set their goals,
select means to attain these goals, and assess progress toward
these goals (e.g., Carver and Scheier 1998). According to
regulatory focus theory (Higgins 1998), self-regulation involves two separate systems called promotion and prevention. The promotion system, which originates in the regulation of nurturance needs, relies on approach strategies
when regulating toward desirable ends (e.g., practicing for
several hours a day to become a good tennis player). This
system is especially active under the pursuit of ideals, that
is, the pursuit of wishes, dreams, and aspirations. In contrast,
the prevention system, which originates in the regulation of
security needs, relies on avoidance strategies when regulating toward desirable ends (e.g., refraining from smoking
to become a good tennis player). The prevention system is
especially active under the pursuit of oughts, that is, under
the fulfillment of responsibilities, obligations, and duties.
Although both systems are assumed to coexist in every
individual, one or the other may be temporarily or chronically more accessible. For instance, the promotion system
can be made temporarily more accessible by priming a persons ideals (e.g., Higgins et al. 1994; Pham and Avnet
2004) or by framing a task in an approach manner (e.g., to
find more than 90% of the solutions; Roney, Higgins, and
Shah [1995]). Similarly, the prevention system can be made
temporarily more accessible by priming a persons oughts
or by framing a task in an avoidance manner (e.g., not to
miss more than 10% of the solutions). In addition, the promotion system seems to be chronically more accessible
among people from individualist cultures (Lee, Aaker, and
Gardener 2000) and people with strong and accessible ideals

Theoretically, both potential financial gains and potential

financial losses should be weighted in investment decisions.
This is consistent with the standard finance principle that
risks and expected returns should be assessed jointly. If
investment decisions are indeed regulated by the promotion
and prevention systems, ideally, both systems should be
activated simultaneously. Indirect evidence suggests, however, that these two systems tend to operate separately. It
has been found, for instance, that promotion not only increases the speed with which promotion-consistent emotions
are assessed but also decreases the speed with which prevention-consistent emotions are assessed. Prevention produces the opposite effects (Shah and Higgins 2001). Likewise, Pham and Avnet (2004) found that promotion not only
increases the reliance on affective information (presumably
more compatible with promotion) but also decreases the
reliance on substantive information (presumably more compatible with prevention). Again, prevention produces the
opposite effects. Therefore, the engagement of either system,
promotion or prevention, seems to be accompanied by the
disengagement of the other system (see also Brendl, Higgins,
and Lemm 1995). How can two systems that appear to
inhibit each other govern decisions that ideally would require both systems to operate jointly? This issue brings us
to our main hypothesis.
There is compelling evidence that consumers tend to compartmentalize their consumption activities and financial matters into separate mental categories (e.g., Heath and Soll
1996; Thaler 1985). According to Thaler (1985, 1999), this
compartmentalization makes the allocation of wealth more
tractable and the control of consumption more effective.
Brendl, Markman, and Higgins (1998) suggest that mental
accounts serve a more general function. They argue that
mental accounts are typically set up around salient goals. A
primary motivation for setting up these accounts is that goals

SELF-REGULATION ACROSS FINANCIAL PRODUCTS

often conflict with each other (e.g., working hard vs. spending time with the family). Creating multiple accounts, each
with their own goals, provides a mechanism for allocating
limited resources (e.g., wealth, time, energy) across conflicting goals and for sheltering each goal from the interference of competing goals. Consistent with these ideas, we
postulate that consumers rely on two separate mental accounts in their investment decisions: one that calls on the
promotion system to regulate the achievement of financial
gains and the other that calls on the prevention system to
regulate the avoidance of financial losses. This compartmentalization allows both systems to regulate investment
decisions without interfering with each other. However,
within each account, each mode of financial self-regulationpromotion or preventiontends to be pursued to the
exclusion of the other.
We also propose that, over time, consumers come to see
different financial products as representative of promotion
versus prevention through repeated exposure to business
news, promotional materials, financial advice, and so forth.
We speculate, for example, that, everything else being equal,
common stocks and small business ownerships are seen as
relatively more representative of promotion, whereas government bonds and certificates of deposits are seen as relatively more representative of prevention. Similarly, independent of the types of assets held in these accounts,
brokerage/trading accounts tend to be seen as relatively more
representative of promotion, whereas savings and retirement
accounts (e.g., 401[k]s, IRAs) are seen as relatively more
representative of prevention. Because financial products are
categorized in terms of promotion versus prevention, which
involve separate systems, trade-offs between financial gains
and financial lossesthe psychological equivalent of the
trade-offs between risks and returns in financeare not performed simultaneously but only across mental accounts.

Effects on Investment Behavior

Sensitivity to Gains versus Losses. A major difference
between promotion and prevention is a differential sensitivity to positive versus negative outcomes (Higgins 1998).
Being approach oriented, the promotion system is more sensitive to the presence or absence of positive outcomes such
as praise, achievements, and gains. In contrast, being avoidance oriented, the prevention system is more sensitive to
the presence or absence of negative outcomes such as criticisms, failures, and losses. We hypothesize that, because
financial products are mentally categorized in terms of promotion versus prevention, these products themselves may
spontaneously trigger states of promotion versus prevention.
As a result, financial products representative of promotion
will be evaluated with a greater sensitivity to potential gains
and lesser sensitivity to potential losses, and financial products representative of prevention will be evaluated with a
greater sensitivity to potential losses and lesser sensitivity
to potential gains. This proposition is a significant departure
from both standard finance theory and previous work on

127

regulatory focus theory (Pham and Higgins, forthcoming).

Unlike standard finance theory, which considers investors
goals an exogenous given, this proposition suggests that
these goals may become endogenously determined by the
alternatives themselves. Unlike previous work on regulatory
focus theory, which has examined promotion and prevention
as preexisting motivational states that influence judgments
and decisions, this proposition suggests that these motivational states can also be triggered by the objects of judgments and decisions.

Risk Propensity. A major correlate of promotion versus

prevention is a different propensity toward risk. In most
situations, the activation of promotion entails greater risk
taking, whereas the activation of prevention entails greater
risk aversion. Two sets of mechanisms contribute to a difference in risk propensity across systems. First, because promotion centers on approaching matches to desired ends, this
system creates an inherent drive to capture as many existing
opportunities as possible (Higgins 1998). This drive generally translates into a more eager form of exploration and
greater risk taking (e.g., Crowe and Higgins 1997; Pham
and Avnet 2004). In contrast, because prevention centers on
avoiding mismatches to desired ends, this system produces
a drive to protect against potential mistakes. This drive generally translates into a more vigilant form of exploration
and greater risk aversion. The difference in risk propensity
is also a by-product of the two systems differential attention
to gains and losses. In many domains, options (e.g., surgery)
with greater potential upsides (e.g., complete riddance of
medical condition) also present greater potential downsides
(e.g., life-threatening complications), whereas options (e.g.,
continuous medication) with smaller potential downsides
(e.g., few side effects) are also those with smaller potential
upsides (e.g., symptoms relief without complete cure). In a
choice between (a) a risky alternative with greater upsides
and greater downsides and (b) a conservative alternative
with smaller downsides and smaller upsides, promotion focusing on positive outcomes would favor the risky option,
whereas prevention focusing on negative outcomes would
favor the conservative option.1
We therefore hypothesize, because financial products are
mentally categorized in terms of promotion versus prevention, that these products themselves may spontaneously trigger different risk propensities. Financial products representative of promotion will engender greater risk seeking,
whereas products representative of prevention will engender
greater risk aversion. Again, this proposition departs from
standard finance theory and previous work on regulatory
1
Differential risk propensity is not a defining characteristic of regulatory
focus, that is, promotion and prevention do not always mean risk seeking
and risk aversion. It is only a correlate of the fact that, in most situations,
capturing opportunities and achieving gains (promotion) generally increase
risk, whereas preventing mistakes and avoiding losses (prevention) generally decrease risk. In situations where capturing gains does not entail
greater risk and avoiding losses does not entail lower risk, promotion is
not expected to produce risk seeking, nor is prevention expected to produce
risk aversion. We return to this issue in the general discussion.

JOURNAL OF CONSUMER RESEARCH

128
FIGURE 1
EXPERIMENT 1: INVESTMENT INTENTIONS AS A FUNCTION
OF FINANCIAL PRODUCT AND PAYOFF

vention), respondents would be relatively more sensitive to

potential losses than to potential gains.

Method

focus theory in that the investment alternatives themselves

dictate the investors risk attitudes and regulatory orientations.

Overview of the Studies

These ideas were tested across four experiments. Experiments 1, 2, and 4 were conducted among 722 adult consumers in the United States between spring 2000 and spring
2001. Experiment 3 was conducted among 107 university
employees in Hong Kong in the fall of 2002. Experiment
1 tested the proposition that different financial products trigger asymmetric sensitivities to gains and losses. Experiment
2 tested the proposition that money mentally associated with
different financial accounts is invested with different risk
propensities. Experiments 3 and 4 provided more direct tests
of the main hypothesis that different financial products are
associated with distinct promotion versus prevention orientations.

EXPERIMENT 1
This experiment tests the prediction that different financial
products may activate different promotion versus prevention
orientations, resulting in asymmetric sensitivities to potential
gains and potential losses across products. Respondents were
presented with an investment opportunity involving either
an individual stock in a trading account or a mutual fund
in an IRA (individual retirement account). The gains and
losses prospects of this investment opportunity were varied
across respondents. It was predicted that, when evaluating
an individual stock in a trading account (which is presumably more representative of promotion), respondents would
be relatively more sensitive to potential gains than to potential losses. In contrast, when evaluating a mutual fund
in an IRA (which is presumably more representative of pre-

A total of 198 respondents were asked to imagine that

they had $5,400 available and to evaluate an investment
opportunity whose description was varied in a 2 # 3 between-subjects design. The first factor manipulated whether
the investment opportunity was described as an individual
stock offered in a trading account or as a mutual fund offered
in an IRA. The second factor manipulated the potential payoffs of the investment opportunity. In the baseline condition,
the opportunity was described as having an 85% chance of
gaining 12% and a 15% chance of losing 4.5%. In the
greater-gains condition, it was described as having an 85%
chance of gaining 24% and a 15% chance of losing 4.5%.
In the greater-losses condition, it was described as having
an 85% chance of gaining 12% and a 15% chance of losing
13.5%. All respondents were told that gains and losses were
to be realized in 1 yr. and that tax considerations were to
be ignored. Respondents indicated their intention of investing in the opportunity on a nine-point scale.
It was predicted that the difference in investment intentions between the greater-gains condition and the baseline
condition would be more pronounced in the stock-in-trading-account condition than in the mutual-fund-in-IRA condition. In contrast, the difference in investment intentions
between the greater-losses condition and the baseline condition would be more pronounced in the mutual-fund-inIRA condition than in the stock-in-trading-account condition.

Results
A 2 # 3 ANCOVA of the investment intentions, with
income as a covariate, indicated that respondents were most
willing to invest in the greater-gains condition (M p 7.24)
and least willing to invest in the greater-losses condition
(M p 6.25), with the baseline condition (M p 6.68) falling
in between (F(2, 189) p 3.86, p ! .05). Respondents were
therefore sensitive to the payoff manipulation. They were
also more willing to invest in the stock offered in the trading
account (M p 7.08) than in the mutual fund offered in the
IRA (M p 6.37; F(1, 189) p 6.25, p ! .02).
More importantly, there was an interaction between payoffs and type of product (F(2, 189) p 2.87, p ! .06). As
illustrated in figure 1, in the stock-in-trading-account condition, investment intentions were significantly higher in the
greater-gains condition (M p 7.77) than in the baseline condition (M p 6.57; F(1, 189) p 6.14, p ! .03), which did
not differ from the greater-losses condition (M p 6.89;
F ! 1). In contrast, in the mutual-fund-in-IRA condition,
investment intentions were significantly lower in the greaterlosses condition (M p 5.60) than in the baseline condition
(M p 6.79; F(1, 189) p 6.04, p ! .03), which did not differ
from the greater-gains condition (M p 6.70; F ! 1). Interaction contrasts confirmed that respondents were more sen-

SELF-REGULATION ACROSS FINANCIAL PRODUCTS

sitive to the differences in losses in the mutual-fund-in-IRA

condition than in the stock-in-trading-account condition
(F(1, 189) p 3.98, p ! .05) and more sensitive to the differences in gains in the stock-in-trading-account condition
than in the mutual-fund-in-IRA condition (F(1, 189) p
3.18, p ! .07).

Discussion
The results indicate that consumer investors may have
asymmetric sensitivities to potential gains versus losses
across financial products. When the investment opportunity
was described as an individual stock in a trading account,
respondents were more influenced by differences in potential
gains than by differences in potential losses. However, when
the opportunity was described as a mutual fund in an IRA,
respondents were more influenced by differences in potential
losses than by differences in potential gains. Given that
respondents were explicitly told to consider a 1-yr. horizon
and ignore any tax implications, this pattern of results cannot
be explained by standard economic and finance principles.
We propose that the results arose because individual
stocks and trading accounts are mentally associated with
promotion, whereas mutual funds and IRAs are mentally
associated with prevention. Decisions involving different
financial products tend to trigger the motivational orientations typically associated with these products, which in turn
result in asymmetric sensitivities to gains and losses. To the
best of our knowledge, this study is the first to document
that different regulatory orientations may be triggered by
the options themselves. More direct evidence is provided in
experiment 3.

EXPERIMENT 2
Experiment 1 suggests that equivalent investment opportunities made of different types of assets offered in different
types of accounts trigger distinct promotion versus prevention orientations, which result in different sensitivities to
potential gains and losses when evaluating these opportunities. Experiment 2 tests the prediction that, even if the
type of asset is held constant, the mere association of investment capital to different types of financial accounts can
trigger different promotion versus prevention inclinations in
how this capital is invested outside these accounts. Specifically, money made available from a trading account will
be treated with a stronger promotion focus and therefore
invested in a more risk-seeking manner than money made
available from a retirement account (an IRA), which will
be treated with a stronger prevention focus and invested in
a more risk-averse manner. Two forms of evidence were
collected to document that these effects are caused by the
differential activation of promotion and prevention. First,
we show that the phenomenon is amplified when the respondents are encouraged to reflect on their goals, that is,
when self-regulation is actively engaged. Second, we show
that the observed changes in investment behavior are indeed

129

mediated by differences in promotion versus prevention

orientations.

Method
Design. A total of 271 respondents participated in a 2
# 2 between-subjects design. They were asked to imagine
that $20,000 had become available for withdrawal from one
of their accounts at no cost (no penalty, no fee, no tax, etc.).
They could invest this money in a business venture where
they had a 70% chance of earning an 18% return in 1 yr.,
and a 30% chance of losing 11% in 1 yr. The first factor
manipulated whether the money had become available from
a trading account or from an IRA. The second factor manipulated the salience of the respondents investment goals.
Before reading about the decision, respondents in the highgoal-salience condition were reminded of the importance of
having clear objectives when making investment decisions
and were encouraged to keep their investment objectives in
mind when making their decisions. Respondents in the lowgoal-salience condition did not receive such instructions.
Measures. Investment intentions were collected on a 9point scale. The amount of money respondents were willing
to invest (out of the $20,000) was measured in an openended manner. Respondents were also asked to write down
reasons for their decisions. As a process measure of the
activation of promotion versus prevention, respondents were
asked to allocate 100 points between two concerns they
might have had when making the decision: (a) gaining
money and (b) avoiding losing money. Respondents also
rated the amount of effort they put into making the decision
on a 7-point scale.
Predictions. The decision implied a choice between the
relatively safe option of leaving the money as cash in its
original account and the relatively risky option of investing
in the venture with its upsides and downsides. In such situations, promotion should favor risk seeking and prevention
should favor risk aversion. It was therefore predicted that
intentions to invest (and amount invested) would be higher
when the money originated from a trading account (hypothesized to trigger promotion) than when it originated
from an IRA (hypothesized to trigger prevention). Because
the effects of promotion versus prevention should be
stronger when self-regulation is actively engaged, it was also
predicted that the effect of money origin would be stronger
if respondents were asked to reflect on their investment
goals. Finally, it was predicted that the effect of money
origin on willingness to invest would be mediated by differences in concern for achieving gains versus avoiding
losses, that is, differences in regulatory focus.

Results
Investment Intentions and Amount Invested. A 2 #
2 ANOVA of the investment intentions revealed a strong
main effect of money origin (F(1, 266) p 18.01, p ! .001;

JOURNAL OF CONSUMER RESEARCH

130
TABLE 1

EXPERIMENT 2MEANS AS A FUNCTION OF MONEY ORIGIN AND GOAL SALIENCE

High goal salience

Investment intention
Amount of money invested
Importance of achieving gains (%)
Importance of avoiding losses (%)

Low goal salience

Money from trading

account (n p 66)

Money from IRA

(n p 70)

Money from trading

account (n p 66)

Money from IRA

(n p 68)

6.45a
$10,727a
57.73a
42.27a

4.60c
$6,980c
42.17b
57.83b

5.36b
$9,383b
61.49a
38.51a

4.79c
$7,761c
40.78b
59.22b

NOTE.Different superscripts within each row indicate a significant difference at p ! .05.

see table 1). As predicted, respondents were more willing

to invest in the risky business venture when the money came
from a trading account (M p 5.91) than when it came from
an IRA (M p 4.70). Importantly, this effect interacted with
goal salience (F(1, 266) p 5.06, p ! .05). The tendency to
take greater investment risks when the money came from a
trading account (as opposed to an IRA) was more pronounced in the high-goal-salience condition (MTrading p
6.45 vs. MIRA p 4.60; F(1, 266) p 21.24, p ! .001) than
in the low-goal-salience condition (MTrading p 5.36 vs.
MIRA p 4.79; F(1, 266) p 1.97, p p .14).2 This amplification is consistent with a self-regulation interpretation. The
main effect of goal salience was not significant (F ! 1).
An ANOVA of the amount of money that respondents
were willing to invest revealed a similar main effect of
money origin (F(1, 263) p 14.62, p ! .001). Respondents
were willing to invest more when the money came from a
trading account (M p $10,065) than when it came from an
IRA (M p $7,362). Although the interaction was not significant (F(1, 263) p 2.29, p p .13), the effect of money
origin was again slightly stronger under high goal salience
(MTrading p $10,727 vs. MIRA p $6,980; F(1, 263) p
14.51, p ! .001) than under low goal salience (MTrading p
$9,383 vs. MIRA p $7,761; F(1, 263) p 2.62, p p .11).
The main effect of goal salience was not significant (F !
1).

Mediation of Promotion versus Prevention. As anticipated, relative concern for achieving gains indicated that
respondents were relatively more promotion oriented in the
trading-account condition (M p 59.57%) than in the IRA
condition (M p 41.48%; F(1, 262) p 33.07, p ! .001).
Equivalently, concerns for avoiding losses indicated that
respondents were relatively more prevention oriented in the
IRA condition (M p 58.52%) than in the trading-account
2
Although our hypotheses call for examining the simple effects of money
origin within each level of goal salience, one could alternatively examine
the simple effects of goal salience within each level of money origin. When
the money came from a trading account, investment intentions increased
significantly under high goal salience (F(1, 266) p 7.24, p ! .05). However, when the money came from an IRA, investment intentions did not
decrease significantly under high goal salience (F ! 1). This null simple
effect could be due to a floor effect or to a stronger chronic association
between prevention and IRAs (compared to the association between promotion and trading accounts).

condition (M p 40.43%). To test that this difference in regulatory focus mediated the effect of money origin on willingness to invest in the venture, we conducted four regressions. The first showed that respondents were more likely
to invest when the money came from a trading account than
when it came from an IRA (b p 0.61, p ! .001). The second
showed that respondents placed a greater weight on achieving gains (as opposed to avoiding losses) when the money
came from a trading account than when it came from an
IRA (b p 9.07, p ! .001). The third showed that a greater
concern for achieving gains (as opposed to avoiding losses)
led to higher intention to invest (b p 0.05, p ! .001). The
final regression showed that the effect of money origin on
investment intentions lost much of its significance (b p
0.25, p p .07) after controlling for concern for gains (Sobels Z p 4.95; p ! .05). In fact, 85.6% of the main effect
of money origin on investment intentions was mediated by
the difference in concern for gains versus losses across
conditions.

Discussion
Respondents were found to be more willing to invest in
a risky business venture with money originating from a
trading account than with money originating from an IRA.
This result suggests that the mere association of investment
capital with different financial accounts triggers distinct promotion versus prevention orientations and, thus, different
risk propensities. Three additional results support this interpretation. First, consistent with the idea that the phenomenon is linked to processes of self-regulation, the effect was
amplified when respondents were encouraged to reflect on
their financial goals. Second, respondents indeed had a
greater concern for achieving gains (promotion) when the
money came from a trading account and a greater concern
for avoiding losses (prevention) when the money came from
an IRA. Most importantly, the effect of money origin on
investment intentions was almost entirely mediated by respondents concern for achieving gains versus avoiding
losses.
One could argue that although respondents were told to
ignore any tax implications associated with the withdrawal
of money from either account, some might still have factored
in the tax advantages of IRAs. However, this explanation

SELF-REGULATION ACROSS FINANCIAL PRODUCTS

would not account for the finding that the main effect of
money origin was almost entirely mediated by a difference
in relative concern for gains versus losses. Moreover, in their
open-ended responses, only seven of 271 respondents
(2.6%) mentioned taxes as a consideration. (Omitting them
leaves the main results unchanged.)
To account for the finding that the effect of money origin
was stronger when respondents were reminded of their investment goals, one could also argue that such a reminder
may have increased the amount of effort the respondents
put into the decision, thereby reducing error rates in the
high-goal-salience condition. However, a test of homogeneity of variance shows that the experimental error was
equivalent across conditions (F ! 1). Moreover, self-reports
of amount of effort were also equivalent across goal salience
conditions (F(1, 262) p 1.4, p 1 .2).

EXPERIMENT 3
In this experiment we attempt to provide more direct
evidence that the phenomena observed in experiments 1 and
2 are caused by the mental categorization of financial products in terms of promotion versus prevention. If, as hypothesized, different financial products indeed trigger distinct promotion or prevention orientations, these orientations
may carry over to unrelated tasks that are sensitive to promotion versus prevention. This experiment tests the prediction that different financial products can actually prime states
of promotion versus prevention that will manifest themselves in subsequent judgments and choices. Respondents
were asked to make several decisions involving either individual stocks offered in trading accounts or mutual funds
offered in retirement accounts. After making these decisions,
respondents performed two unrelated tasks that were expected to be sensitive to states of promotion versus prevention. It was predicted that respondents who had made decisions about individual stocks in trading accounts would
perform these tasks in a more promotion-oriented manner,
whereas those who had made decisions about mutual funds
in retirement accounts would perform these tasks in a more
prevention-oriented manner.

Method
Manipulation. A total of 107 respondents took part in
two ostensibly unrelated studies. In the first study, respondents were asked to make three investment decisions similar
to the decision respondents made in experiment 1. Each
decision involved evaluating an investment opportunity
whose return profile (payoffs and probabilities) was described. The opportunities return profiles differed from one
another but were held constant across conditions. The only
experimental manipulation was of the type of financial product involved. In one condition, the three investment opportunities were labeled as individual stocks offered in a trading
account. In the other condition, the opportunities were labeled as mutual funds offered in a retirement account.

131

Dependent Measures. After completing the first study,

respondents were asked to complete two different tasks, both
meant to assess their state of promotion versus prevention.
The first task consisted of three separate consumption
choices. The first choice was between two brands of grape
juice. Brand A was described as rich in vitamin C and iron,
thus promoting high energy (a promotion benefit), whereas
Brand B was described as rich in antioxidants, thus reducing
the risk of cancer and heart diseases (a prevention benefit).
The second choice was between two brands of toothpaste.
Brand Xs strength was in cavity prevention (a prevention
benefit) and Brand Zs was in tooth whitening (a promotion
benefit). The third choice was between two snacks. One was
a rich and tasty chocolate cake (presumably superior on the
promotion-related dimension of taste), and the other was a
healthy and fresh fruit salad (presumably superior on the
prevention-related dimension of healthiness). Respondents
indicated their preferences on 1 (option 1) to 9 (option 2)
scales. It was expected that, across all three choices, respondents who had made decisions about individual stocks
in trading accounts would tend to prefer the option with the
promotion benefit (Brand A, Brand Z, and the chocolate
cake), whereas respondents who had made decisions about
mutual funds in retirement accounts would tend to prefer
the option with the prevention benefit (Brand B, Brand X,
and the fruit salad).
Respondents then completed a second task that has been
shown to capture differences in regulatory focus (Higgins
et al. 1994). Respondents were offered six possible strategies
that they could use for friendship and asked to select three.
Three of the six strategies were approach oriented (e.g., to
be generous and willing to give of myself ), and three were
avoidance oriented (e.g., to stay in touch and avoid losing
contact with my friends). It was expected that, compared
to those who had made decisions about mutual funds in
retirement accounts, respondents who had made decisions
about individual stocks in trading accounts would select
more approach strategies and fewer avoidance strategies.

Results
Consumption Decisions. A MANOVA of the preferences expressed in the three consumption choices revealed
a significant main effect of type of investment alternative
(Wilks l p .881, F(3, 102) p 4.6, p ! .01). Univariate
analyses showed that, compared to those in the individualstock-in-trading-account condition, respondents in the mutual-fund-in-retirement-account condition were more likely
to prefer (a) the brand of grape juice that reduced the risk
of cancer and heart disease (M p 6.17 vs. 4.51; F(1,
104) p 9.54, p ! .01), (b) the brand of toothpaste that promised cavity prevention (M p 6.85 vs. 5.74; F(1, 104) p
4.51, p ! .05), and (c) the fruit salad (M p 6.23 vs. 5.42;
F(1, 104) p 1.75, p p .19).
Strategies for Friendship. An ANOVA of the number
of approach strategies chosen revealed a significant effect
of type of investment alternative (F(1, 105) p 4.77, p !

JOURNAL OF CONSUMER RESEARCH

132

.05). Respondents in the individual-stock-in-trading-account

condition chose more approach strategies (M p 1.78 out of
3) than those in the mutual-fund-in-retirement-account condition (M p 1.49). (Of course, the number of avoidance
strategies chosen exhibits the mirror effect.)

Discussion
The first two experiments suggest that certain financial
products trigger different sensitivities to gains and losses
and different risk propensities in investment decisions. This
experiment provides more process-level evidence that these
effects may be due to a mental categorization of financial
products in terms of promotion versus prevention. It was
found that the mere act of making decisions about different
types of financial products resulted in subsequent unrelated
decisions being carried out with distinctive promotion versus
prevention orientations. Respondents who had just made
decisions about individual stocks in trading accounts were
found to prefer consumer products with promotion-related
benefits and favor approach strategies in friendship. In contrast, respondents who had just made decisions about mutual
funds in retirement accounts were found to prefer products
with prevention-related benefits and favor avoidance strategies in friendship. Financial products can spontaneously
prime states of promotion versus prevention that are sufficiently strong to influence subsequent behavior in totally
different domains.

EXPERIMENT 4
Experiment 3 provided support for the main hypothesis
(that financial products are mentally categorized in terms of
promotion vs. prevention) by showing that the mere evaluation of financial products can prime distinct motivational
orientations that carry over to subsequent unrelated tasks.
In this experiment, we provide additional support for this
hypothesis by showing the reverse effect. Specifically, we
demonstrate that priming distinct regulatory focuses through
unrelated tasks can affect consumers investment allocations
across different financial products. We also demonstrate that
both different types of assets (individual stocks vs. mutual
funds) and different types of accounts (trading accounts vs.
IRAs) carry distinct associations to promotion versus preventionan issue left open by experiments 1 and 3.

Method
A total of 253 respondents were assigned to either a promotion condition or a prevention condition. The experiment
included two phases. In the first phase, respondents were
asked to complete two tasks framed either in an approach
manner or in an avoidance manner. As mentioned earlier,
tasks framed in an approach manner tend to activate a state
of promotion, whereas tasks framed in an avoidance manner
tend to activate a state of prevention (e.g., Forster et al.
2001; Roney et al. 1995). The first task involved proofreading a short article. In the promotion condition, respon-

dents were instructed to find a maximum number of misspellings. In the prevention condition, respondents were
instructed to avoid missing any misspellings. The second
task involved solving several anagrams. In the promotion
condition, respondents were instructed to construct the
maximum number of words and identify more than twothirds of all possible words. In the prevention condition,
respondents were instructed to avoid missing any words
that can be constructed and not miss more than one-third
of all possible words.
In the second phase, respondents were asked to imagine
that they had inherited $2,000 and to make two separate
allocation decisions. The first decision was between two
different types of financial accounts. One option was to
deposit the money into your online trading account (e.g.,
E*Trade) for later investment; the other option was to
deposit the money into an individual retirement account
(IRA) for later investment. Respondents were asked to indicate which option they preferred on a 1 (online trading
account) to 9 (IRA) scale, and specify how much of the
$2,000 they would allocate to each type of account. The
second allocation decision was between two types of assets.
Respondents were instructed: Regardless of which account
you decided to deposit the inheritance money into, assume
that you have a choice between investing in two assets:
Stock A and Mutual Fund B. Each of them is average,
that is, typical of an average U.S. stock or an average U.S.
mutual fund. They were further instructed to make their
decisions based on the given information and your knowledge of average returns and risks of stocks and mutual
funds. Respondents were asked to indicate their preference
on a 1 (stock A) to 9 (mutual fund B) scale and specify
how much of the $2,000 they would allocate to each type
of asset.
It was predicted that, compared to those primed with promotion, respondents primed with prevention would be more
likely to allocate money (a) to the IRA, as opposed to the
online trading account, and (b) to the mutual fund, as opposed to the individual stock.

Results
Allocation across Accounts. Across conditions, the
mean relative preference for depositing the $2,000 in the
IRA (as opposed to the online trading account) was 5.91,
indicating that, on average, depositing the money in an IRA
was judged more attractive than depositing the money in an
online trading account (t(252) p 5.50, p ! .0001). More importantly, as predicted, the preference for depositing money
in an IRA (as opposed to a trading account) was stronger
when a prevention focus was primed (M p 6.33) than when
a promotion focus was primed (M p 5.51; F(1, 251) p
6.05, p ! .05). The amount of money that respondents allocated to each type of account exhibited a similar pattern.
Again, the mean allocation was skewed toward the IRA
(M p $1,142 out of $2,000), indicating that this type of
account was perceived to be relatively more attractive than

SELF-REGULATION ACROSS FINANCIAL PRODUCTS

a trading account (t(252) p 4.16, p ! .0001). More importantly, there was again a main effect of regulatory focus
(F(1, 251) p 3.53, p p .06). More money was allocated to
the IRA (as opposed to the online trading account) when
prevention was primed (M p $1,208) than when promotion
was primed (M p $1,081). These findings indicate that certain types of financial accounts, such as IRAs, tend to be
categorized in terms of prevention, whereas other types of
accounts, such as online trading accounts, tend to be categorized in terms of promotion.

Allocation across Assets. Across conditions, the mean

relative preference for investing the $2,000 in the mutual
fund (as opposed to the individual stock) was 6.10, indicating that, on average, investing the money in a mutual
fund was judged more attractive than investing in an individual stock (t(252) p 7.39, p ! .0001). More importantly,
as predicted, preference for investing in the mutual fund (as
opposed to in the individual stock) was stronger when prevention was primed (M p 6.48) than when promotion was
primed (M p 5.75; F(1, 251) p 6.19, p ! .02). The amount
of money allocated to the two types of assets exhibited a
similar pattern. On average, allocations were skewed toward
the mutual fund (M p $1,179 out of $2,000; t(252) p
5.39, p ! .0001), and this tendency was more pronounced
when prevention was primed (M p $1,257) than when promotion was primed (M p $1,107; F(1, 251) p 5.13, p !
.05). These results suggest that, independent of the types of
accounts, certain types of assets, such as mutual funds, tend
to be associated with prevention, whereas other types of
assets, such as individual stocks, tend to be associated with
promotion.

Discussion
Priming promotion versus prevention through unrelated
tasks was found to produce significant differences in how
money was allocated across different types of accounts and
across different types of assets. When the unrelated tasks
were framed in an avoidance manner, priming prevention,
respondents allocations tended to shift (a) toward the IRA
(away from the online trading account) and (b) toward the
mutual fund (away from the individual stock). In contrast,
when the unrelated tasks were framed in an approach manner, priming promotion, respondents allocations tended to
shift (a) toward the online trading account (away from the
IRA) and (b) toward the individual stock (away from the
mutual fund). These effects were obtained while holding
both the types of accounts and the types of assets constant
across respondents.

GENERAL DISCUSSION
Financial Products as Carriers of Promotion
and Prevention
In the minds of consumer investors, financial products
seem to be associated with distinct self-regulatory orienta-

133

tions. Some products, such as individual stocks and trading

accounts, seem to be identified with promotion and the
achievement of gains. Other products, such as mutual funds
and retirement accounts, seem to be identified with prevention and the avoidance of losses. These mental associations
were evident in experiment 3, where the mere evaluation of
investment opportunities, labeled either as individual stocks
in trading accounts or as mutual funds in retirement accounts, was found to trigger distinct promotion or prevention
orientations that carried over to unrelated judgments and
decisions. These associations were also evident in experiment 4, where the mere priming of promotion versus prevention was found to influence how consumers allocated
money across different types of assets and different types
of accounts.
The connections that consumers draw between financial
products and either promotion or prevention are not inconsequential. Experiment 1 revealed that consumers were more
sensitive to an investments upside potential and less sensitive to its downside potential if it was described as an
individual stock in a trading account than if it was described
as a mutual fund in a retirement account. Experiment 2
additionally showed that consumers were more willing to
make risky investments if they associated their investment
capital with a trading account than if they associated it with
a retirement account. In short, consumers relative concern
for gains and losses and their attitude toward risk seem to
shift depending on the type of financial products involved.
As discussed further below, this finding has important
implications.
One interpretation for experiments 1 and 2 is that different
financial products trigger different sensitivities to gains and
losses and different attitudes toward risk directly, not
through promotion and prevention. Three sets of results
challenge this interpretation. In experiment 2, the effect of
type of account on respondents willingness to make a risky
investment was almost entirely mediated by the respondents
relative concern for promotion versus prevention. Moreover,
experiment 3 clearly showed that the mere evaluation of
different financial products does activate states of promotion
or prevention. Finally, experiment 4 showed that priming
states of promotion or prevention steers investors toward
different types of financial products. These results suggest
a clear connection between certain financial products and
promotion or prevention.
Another interpretation for experiments 1 and 2 is that
respondents may have assumed different financial situations
depending on the type of products involved in the decisions.
They may have assumed a greater income level when evaluating individual stocks in a trading account (as opposed to
mutual funds in an IRA) or investing money drawn from a
trading account (as opposed to an IRA). People with higher
income can afford to take greater risks. Several pieces of
evidence seem to conflict with this interpretation, however.
In experiment 2, only 6% of the respondents mentioned
income and wealth when explaining their decisions. These
respondents were equally distributed across conditions, and

134

dropping them from the analyses does not affect the results.
More importantly, a difference in assumed wealth cannot
explain the findings of experiments 3 and 4.
Because promotion versus prevention is correlated with
risk seeking versus risk aversion, one may also argue that
the results were not driven by differences in regulatory focus
but by differences in risk attitudes. We tend to disagree.
Differences in risk attitudes are not defining characteristics
of promotion versus prevention. Different risk attitudes are
by-products of promotion and prevention in environments
where seizing opportunities and achieving gains (i.e., promotion) increases risk and preventing mistakes and avoiding
losses (i.e., prevention) decreases risk. As demonstrated by
Zhou (2002, study 6), the correlation between promotion
versus prevention and risk seeking versus risk aversion disappears in environments where the achievement of gains
does not entail greater risk and the avoidance of losses does
not entail lesser risk.
Overall, the findings seem consistent with the thesis that
consumers investment decisions are governed by processes
of promotion and prevention self-regulation that are managed across separate mental accounts, with different financial products seen as representative of promotion versus
prevention.

Looking Back, Looking Forward

When the Means Justify the Ends. The finding that
different financial products trigger distinct promotion or preventionand therefore different sensitivities to gains and
losses and attitudes toward riskis a major departure from
previous regulatory focus research and from standard finance theory. Previous work on regulatory focus has treated
promotion and prevention as contextual motivational states
arising either from individual differences or from situational
factors. Our findings show that promotion and prevention
can also be activated by the targets of judgment and decision.
In other words, promotion and prevention do not just dictate
the means that people prefer; these motivational orientations
can also be dictated by the means themselves. Similarly,
finance theory assumes that investors goals are exogenous
and given. Our research shows that these goals may instead
be endogenous and contingent on the investment alternatives. Consumers may infer their investment priorities ex
post from the financial products available to them rather
than evaluating these products based on their ex ante priorities. Again, the means seem to dictate the ends rather
than the reverse.
The Compartmentalization of Financial Promotion
and Prevention. The finding that consumers may regulate
their finances using separate promotion- and preventionoriented accounts is significant. There is growing evidence
that promotion and prevention tend to inhibit each other.
This article suggests a mechanism by which individuals may
overcome the mutual inhibition of the two systems in domains where promotion and prevention both matter. Individuals may create separate mental accounts around pro-

JOURNAL OF CONSUMER RESEARCH

motion and prevention, and manage their self-regulation

across accounts. The compartmentalization of financial promotion and prevention challenges another tenet of standard
finance theory. According to the theory, the risks and expected returns of each alternative should be evaluated
jointly, not separately. Our results suggest that these tradeoffs may be performed only across financial products.
That investors mental accounts may focus exclusively
on promotion or on prevention helps explain several economic puzzles. For instance, investors tend to be overconfident and trade too much with funds held in trading accounts
(e.g., Odean 1999). This would be expected if trading accounts are associated with promotion, resulting in an overweighting of potential upsides and an underappreciation of
potential downsides. Exclusive promotion encourages investor exuberance, which might have contributed to the recent stock market bubble. Similarly, considering that longer
time horizons should theoretically encourage risk taking,
many investors seem to be too conservative with the funds
held in their retirement accounts (Shefrin 2000). These conservative retirement planners appear to underestimate inflation risks compared to investment risks. This would be expected if retirement accounts are associated with prevention,
resulting in an overweighting of potential losses (and underweighting of potential gains), with inflation not considered a loss. Finally, our findings may also explain why, to
the chagrin of many economists, most American consumers
oppose the idea of allowing Social Security funds to be
invested in the stock market. Again, this would be expected
if Social Security is associated with prevention, making potential gains seemingly unimportant and potential losses
clearly unacceptable.

Decision Making as Self-Regulation. More generally,

our findings stress the importance of self-regulation in consumer decision making. There is more to consumer decision
making than information search, multi-attribute brand comparisons, and heuristics and biases. For instance, traditional
models of consumer decision making cannot explain easily
why investment decisions, which typically entail large financial stakes, are often made with a seeming lack of diligence (e.g., Madrian and Shea 2001; Olshavsky and Granbois 1979). We believe that this apparent paradox arises
because, in the financial domain at least, decision making
takes on a more implicit formone where generic processes
of self-regulation dominate and the same basic strategies are
applied over and over again (across mental accounts) rather
than being reconsidered on every occasion. After all, investing is simple: it is about achieving financial gains and
avoiding financial losses.
[David Glen Mick and Dawn Iacobucci served as editors
and Joel Huber served as associate editor for this article.]

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